Our view:
Phone companies profit from
'cramming'

Last summer, John W.
Murray of Dallas noticed some mysterious charges on his AT&T bill. They
weren't phone charges, but from other vendors he didn't recognize. When he
called to get a refund, he says, AT&T told him it was "just the billing
company" and shunted him off to the vendors, one of whom hung up on him.
Murray, a retired fraud examiner, finally got most of his money back —
but not without a fight and a gaggle of complaint
letters.

John W. Murray of
Dallas noticed some mysterious charges on his AT&T phone bill, and he
started investigating.

Not much, even
though this scam, known as "cramming," has likely bilked the public of billions
of dollars over more than two decades.

Cramming involves unscrupulous
vendors tricking consumers into signing up for supposed communications services
such as voice mail, or signing them up without their knowledge. The vendors,
using middlemen, then contract with legitimate phone companies to put the
charges on customers' bills. Many customers fail to notice the small fees;
those who do and pursue refunds often face obstacles.

Fraudulent vendors
are the obvious bad guys here, and authorities have pursued many of them. But
the scammers couldn't operate if legitimate companies refused to put the
charges on customers' bills. AT&T, Verizon and CenturyLink, which recently
bought Qwest, in essence allow scammers to use your telephone number as if it
were a credit card. The phone companies have none of the legal responsibility
to ensure that the charges are legitimate or to provide refunds.

And
often they don't, according to a report released last month
by the Senate Committee on Commerce, Science and
Transportation. While some third-party vendors are legitimate, investigators
found a substantial percentage engaged in fraud.
Some vendors enrolled dead people and then charged
their families. They preyed on senior citizens, small businesses, banks,
hospitals, Fortune 500 companies and government
agencies.

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Though the phone companies say they carefully
screen vendors, drop those that spur numerous complaints and quickly refund
charges, the safeguards aren't working for everybody. Scores of consumers and
businesses told Senate investigators of runarounds they got when they
complained to Verizon and AT&T. Internal e-mails from the companies show
their own employees questioning third-party billing. "I thought we'd ended this
practice," wrote an AT&T executive. "What are we doing?"

Perhaps the
money is just too tough to turn down. Verizon told the committee that it
receives a flat fee of $1 to $2 for every charge it places. The three biggest
companies brought in
$650 million since 2006 from this
business.

Federal regulators have
proposed stronger disclosures. But the charges already
are separated on phone bills, and disclosure skirts the real problem: It's just
too easy for scammers to place the charges on phone bills and too hard for
honest consumers to get rid of them.

Vermont, fed up with its citizens
being cheated, passed a new law this year
prohibiting almost all third-party charges on local
phone bills. If phone companies can't see beyond their profits to do a better
job of policing this problem, then a prod from Washington might be
necessary.

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